Overview & Benefit OptionsPresented by Jan HawkinsSenior Retirement Benefits Officer

What Is IPERS?What Is IPERS?

• The largest public retirement system in Iowa– Members include employees of:

• public schools, cities, counties, state government, state universities, State Board of Regents, & other

• Approximately 340,000 members• 2,000 employers• 108,000 retirees• $1.8 billion in benefit payments paid

annually2

What Is IPERS? What Is IPERS? • 401(a) (defined benefit plan) under IRS codes:

– Lifetime benefits are paid based on a formula, not on the amount of contributions.

– Formula factors • Age• Years of service• Highest average salary

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DB vs. DC: What’s the Difference?

Guaranteed Benefit

YES. Monthly benefit is guaranteed for life.

NO. Benefit fluctuates with market performance.

Investment Risk

Pooled investments.IPERS takes on all the risk.

YOU take on all the risk.

Withdrawals & Loans

NOT AVAILABLE TYPICALLY AVAILABLE

Vesting 100% in your contributions. 100% in your contributions.

Portability YES YES

Death Benefits

YES YES

Disability Benefits

YES. IPERS provides disability benefits depending on certain qualifications.

NO. Defined contribution plans do not usually provide disability benefits.

Fees & Expenses

INCLUDED TYPICALLY HIGH

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401(k), 403(b), etc.(Defined Contribution Plan)

IPERS(Defined Benefit Plan)

How Does It Work?

Contributions from

active membersand employers

are paid in.

Lifetime retirementbenefits,

disability benefits,death benefits,

and refundsare paid out.

The IPERS Trust Fund

The IPERS Trust Fund must be used for the exclusive benefit of members and their

beneficiaries.

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What’s My Part?What’s My Part?• Contributions + interest

–Contributions based on gross wages–Current Regular class contribution rate:

• 5.95% from you, the member • 8.93% from your employer IPERS can adjust the total contribution rate by no more than 1.0 percentage point up or down, following an actuarial valuation.

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What’s My Part?What’s My Part?• Contributions + interest

–Protection class contribution rate:• 6.56% from you, the member • 9.84% from your employer

–Sheriffs/Deputies contribution rate:• 9.88% from you, the member • 9.88% from your employer

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IPERS Annual Interest Rate

1.99% - 20151.65% - 20141.28% - 20131.34% - 20122.03% - 20112.64% - 20103.61% - 20095.33% - 20085.79% - 2007

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What Is “Vesting”?What Is “Vesting”?

Vested status is obtained after:

• 28 quarters (7 years) of reported wages,

or• When wages are reported in

the same calendar year age 65 or older is attained

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VestingVesting

• Entitles the member to:• Monthly retirement or disability benefit

• A portion of employer’s investment if refund is taken

and• Is required for a service purchase

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Benefit FormulaBenefit Formula• Monthly benefits are calculated using:

– Years of Service– Age– Highest Average Salary

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Benefit Formula – Years of Service

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• Each year worked earns 2% of the 60% payable for the first 30 years.

• 1% for a maximum total of 65% payable for each additional year after 30.

• Early retirement reduction if before normal retirement.

Rule of 88

Rule of 62/20

Age 65

At least age 62 with 20 or more years of service

Age + Years of service = 88 or greater

Regardless of service

Normal Retirement Age (No Age Reduction)

Normal Retirement Age (No Age Reduction)

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Reduce 3% a year for portion of service through 06/30/12• From nearest normal retirement

eligibility (rule of 88; rule of 62/20;age 65)

Reduce 6% a year thereafter• From age 65

As of July 1, 2012

Early Retirement Age ReductionEarly Retirement Age Reduction

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Example: Early retirementRetire age 61 with 26.5 years of service

Total years 26.5 Annual multiplierAdjustment factor Adjusted toHow long Reduction

242%3%

62/201 yr3%

June 30, 2012

2.52%6%65

4 yr24%

Example: Early retirement

Reduce 3%/year for 1 year

Earned before 7/1/12:24 x 2% = 48% multiplier$54,000 x 48% = $25,920

Early retirement reduction:$25,920 x 3% = $777.60

$25,920 – $777.60 = $25,142.40

24 yrs 2.5 yrsReduce 6%/year for 4 yrs

Earned starting 7/1/12:2.5 x 2% = 5% multiplier$54,000 x 5% = $2,700

Early retirement reduction:$2,700 x 24% = $648

$2,700 - $648 = $2,052

Annual benefit = $27,194.40

Example: Work 6 more monthsRetire age 61 with 27 years of service

242%0%Rule of 88

0 yr0%

32%0%Rule of 88

0 yr0%

June 30, 2012

Total years 27 Annual multiplierAdjustment factor Adjusted toHow long Reduction

Example: work 6 more months

Rule of 88

Earned before 7/1/12:24 x 2% = 48% multiplier$54,000 x 48% = $25,920

Early retirement reduction:$25,920 x 0% = $0

$25,920

24 yrs 3 yrsRule of 88

Earned starting 7/1/12:3 x 2% = 6% multiplier$54,000 x 6% = $3,240

Early retirement reduction:$2,700 x 0% = $0

$3,240

Annual benefit = $29,160.00

Value of working the additional 6 months

Annual Pension with Reduction$27,194.40

Annual Pension with Rule of 88$29,160.00

Increase of $163.80 per month for lifetime for working an additional 6 months

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Maximizing Years of Service• Free credit

– Leaves of absence • Granted prior to July 1998• Requires verification from employer

– Active military duty• Entered military as an IPERS-covered employee and returned to IPERS employment within one year of discharge• Submission of DD214 form required

Beginning 01/01/16: Purchasing will take place only during the retirement process.• Increased accuracy of cost• Reduced risk of under- or overpaying

Request an official cost quote when you apply for retirement benefits.• Application for Service Purchase

Service PurchasesService Purchases

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Service Purchase OptionsService Purchase Options• Refunded IPERS service• IPERS employment not previously covered • Other public system(s) (if not eligible to draw pension from the other system)• Active duty military/leave of absence time not eligible for free credit • Nonqualified service (air time) 5-year limit• IPERS buy-up credit conversion• Buy-back with cost credit

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How Much Will It Cost?

• Submit an Application for Service Purchase (available at www.ipers.org).

• Your service purchase cost will be calculated.– Official cost quotes generated only after your

Application for Retirement Benefits is on file.– You will receive the cost per quarter and the

entire purchase cost.• Cost quotes are valid for six months. Remember, completing the Application for

Service Purchase does not obligate you to purchase service. 23

Saving Up for a Purchase

• Request a basic cost estimate anytime before retirement.– Application for Service Purchase

• Save money in a separate retirement account that can eventually be rolled over to IPERS for your service purchase.

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Retirement EstimatesRetirement Estimates• Request benefit estimates from IPERS before deciding on a retirement date.

For detailed information on your account:– Call toll-free 1-800-622-3849 or locally at 515-281-0020. Phones are answered by Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday, excluding holidays.

• Working a little longer could increase benefits significantly.• May be eligible to retire earlier!

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Sample Estimate

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Monthly BenefitMonthly Benefit• Six monthly payment options

– Always lifetime to member– Different death benefit provisions

IMPORTANT!• Option choice cannot be changed

once benefits are paid.

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Option Summary

OPTION 1 Guaranteed death benefit in $1,000 increments

OPTION 2 Death benefit only if balance of investment remains

OPTION 3No death benefit

OPTION 4 Dual life annuity

OPTION 5 Guaranteed 10 year monthly benefit payments

OPTION 6 Dual life annuity with pop-up feature for member

Always lifetime to member!

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Pre-Retirement Death Benefits• Designated sole beneficiary of vested member

can elect lump sum payment or lifetime monthly benefit (provided monthly benefit is $50 or more). If member not vested at death, beneficiary only eligible for lump sum payment.

• If designated beneficiary is more than one individual or entity, death benefit can only be paid in lump sum payment. Federal law now allows multiple beneficiaries to rollover lump sum payments.

• If no beneficiary has been designated, lump sum payment made to the estate.

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Important Facts to Remember!Important Facts to Remember!

• Working any time in a month makes you ineligible for benefits that month.

• You can get a paycheck in the same month you start IPERS payments.

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Getting Monthly Benefits StartedGetting Monthly Benefits Started• Must terminate employment unless

age 70• Must be age 55 or older

– Unless vested and eligible for IPERS disability benefits, first month of entitlement is month following the month you terminate employment

• Must submit completed application• Benefits paid the last business day of

month 31

TaxesTaxes

• Benefit payments are subject to federal and state income tax – You can request that the tax can be

withheld from monthly benefit payment• 1099R mailed each January• For detailed tax information, contact

the IRS for publication 575 or consult a tax advisor

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Reemployment

• Must have a bona fide retirement.• It’s your responsibility to contact

IPERS if you are returning to an IPERS-covered position.– It’s possible that returning to an IPERS-

covered position will affect your benefit.• Know the Social Security earning

limits

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Bona Fide Retirement

To qualify for a bona fide retirement, you must:

• End all service with covered employers, including non-covered service.

• File an IPERS benefit application.• Stay out of all employment with a covered

employer for one month.• Stay out of all employment in an IPERS-

covered position for an additional three months. 34

Reemployment Guidelines

Applies to IPERS-covered employment only

• $30,000 earnings limit under age 65 (benefits reduced 50 cents for each dollar earned over the limit)

• No earnings limit after age 65• Benefits recomputed upon

termination

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Online Access 24/7

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When to Contact IPERSWhen to Contact IPERS• 3–5 years from possible retirement for estimates• 5–6 months from retirement to obtain application packet• At termination, if before age 55 for additional options• If a disability occurs

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The purpose of this presentation is to give you a brief overview of IPERS and upcoming law changes.

For detailed information on your account:

• Call toll free 1-800-622-3849 or locally at 515-281-0020 Phones are answered by Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday, excluding holidays.

• Website: www.ipers.org

• E-mail requests: info@ipers.org

• Retirement calculators

• Handbook

• Newsletters

• Other important information

Contact us:Contact us:

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Thank You!

Presented by Jan HawkinsSenior Retirement Benefits Officer